Naughty America Is The Future Of Porn

David M. Ewalt
, ContributorI focus on the intersection of games and technology.Opinions expressed by Forbes Contributors are their own.

Ian Paul, CIO of Naughty America, photographed at the company's headquarters in San Diego, California. (Robert Gallagher for Forbes)

Jill the babysitter is walking across the kitchen when she notices someone sitting at the counter. “Oh my god!” she squeaks, clutching at the towel wrapped around her otherwise bare body. “Mr. Johnson! I hope you don't mind I used the shower.”

Mr. Johnson doesn’t respond. He is, like the babysitter, a character in an adult video, and the actor who plays him doesn’t have any lines. In fact, the audience will never hear his voice or see his face, even though he does have a big part in the movie. This is virtual reality pornography, and every scene is shot from actor Preston Parker’s point of view. He’s standing behind the camera, and only his forearms, resting on the kitchen counter, are visible in frame.

The babysitter, played by Jill Kassidy, walks towards him and takes one of his hands. “What's wrong?” she asks, looking straight into the camera. “Where's Mrs. Johnson?”

You can imagine where it goes from there.

The first real boom in VR is porn, and adult entertainment companies like Naughty America —producer and distributor of the 2016 release Bangin’ The Babysitter— are leading the way. In just eighteen months, the San-Diego based studio has released 146 virtual reality videos, making it one of the most prolific producers of VR content in the world. When the company operated a large booth at the annual International Consumer Electronics Show in Las Vegas last month, it was the first adult business allowed to exhibit in over a decade.

It should come as no surprise that virtual reality is being used to produce pornography —the appeal of immersive three-dimensional video is obvious. And anyone who knows technology would expect adult entertainment companies to be first movers in the nascent VR industry. After adult content helped popularize new media formats like VHS, Blu-ray and streaming video, the idea that porn drives digital innovation became a widely accepted truth.

But what is surprising is how fast the VR porn boon happened, and how big it has become. The new generation of commercially available VR headsets have barely been in stores for a year; in all of 2016, market research firm SuperData Research estimates that market leaders Sony, Samsung, HTC, Google, and Facebook-owned Oculus sold just over 6.1 million units worldwide. Yet even with relatively few headsets on the market, the percentage of owners that watch virtual reality porn must be huge: Naughty America says its customers downloaded more than 235,000 VR videos in January 2017 alone, and that number was up more than 60% from just two months earlier.

VR porn consumers are also willing to pay to view. Subscriptions to Naughty America’s web site grew 55% in 2016; customers pay $25 to access unlimited videos (including more than 7,500 traditional two-dimensional movies) for a month, or $74 for a year. Naughty America says it converts 1 out of every 300 visitors to VR scene preview pages on its website into paying customers, compared to 1 in 1,500 for traditional scenes.

As a result, the company is making money hand over fist. Naughty America won’t reveal exact numbers, but says that in the 18 months since it released its first VR video, the site's revenues have increased more than 27%; for all of 2016, VR-driven revenues were up 433%.

Naughty America was founded in 2004 as a subsidiary of La Touraine Inc., which owns and operates a handful of adult websites with names like Tonight’s Girlfriend, My Sister’s Hot Friend, and My Friend’s Hot Mom. Though it initially focused on producing adult movies for sale on DVD, Naughty America became the company’s biggest brand after it embraced streaming Internet video.

“We try to be an innovator, a first adopter,” says CIO Ian Paul. “Virtual reality had been on our radar for a long time, but always as one of those ‘Oh, man, if only we could’ ideas.” After Oculus VR successfully funded its first headset via a September 2012 Kickstarter campaign, the company began seriously investigating the technology.

Since no one had really made VR movies before, Naughty America had to invent a process from scratch. "It took a lot of experimentation, a lot of investment into R&D, and basically just buying all the equipment that was available and figuring it out," says Paul. "One of the most basic problems we faced was camera placement, we originally had it too high, and it just felt weird.”

The company’s exact process is proprietary, but like most outfits making VR video, it’s based on a relatively simple setup —two digital cameras rigged together in order to capture binocular view of a scene. Post production involves combining the two video feeds into a single file that includes a left-eye and a right-eye perspective; when viewed through a VR headset, the images combine and appear as a single 3D video.

Naughty America released its first VR movie, “Birthday Surprise,” in July 2015. “We've come a long way in a very, very short period,” says Paul. “I think it's probably the same story for a lot of companies that are in this space. It's moving fast.”

While Naughty America might be leading in the adult VR market, it’s certainly not the only player in the game. Adult entertainment giant PornHub (a subsidiary of the Luxembourg-based technology and digital content conglomerate MindGeek) contracts with Rochester, New York-based virtual reality porn production company BaDoinkVR to produce videos for its websites; smaller players include dedicated VR startups like Virtualrealporn.com, as well as an increasing number of solo performers who offer one-on-one live VR videoconferencing to clients.

Why are so many adult enterprises making the leap into VR? Obviously it’s for the money —according to Piper Jaffray, VR porn will grow into a $1 billion industry by 2020. But there are other reasons to push the tech aside from its commercial appeal. VR makes piracy harder, since the movies must be downloaded and played on specialized hardware; that means the videos can’t be re-distributed on the countless “tube” websites that plague the industry, pirating other companies’ videos and surrounding them with ads.

In fact, while most adult entertainment companies worry about other sites taking and distributing their content, the biggest problem facing producers of VR porn is that not enough partners are willing to take the plunge. At present, the vast majority of VR software and content is sold directly through the companies which produce VR hardware; if a consumer owns Sony’s PlayStation VR headset, they can really only buy content through the PlayStation Store. And as of yet, none of the major digital distribution services allow adult content in their stores. Naughty America subscribers have to download files to their computer or phone and then “sideload” them into a VR video player in order to get it to work.

"A lot of these big companies are fearful of getting associated with porn," says Paul. "I think there's concern about minors accessing the content, but we've had paid-for-view on cable systems for years, so it's not like that problem can't be solved technologically. There's a way you can do verification to avoid that. So I think a lot of it is political."

The big content platforms might do well to open up their doors. The VHS video tape standard famously eclipsed Betamax in part because Sony wouldn't allow porn companies to license its Betamax technology; if Oculus, HTC, Samsung or Sony is the first to relent and allow adult content in their stores, it could be a big selling point for their hardware.

“If you look at the history of technology, anytime anyone's ever bet against porn, they've lost,” says Paul. “Of course we want adoption to happen faster just because it's our business. But it'll happen, it's just a matter of when.”

In the meantime, Naughty America doesn’t mind waiting for the rest of the world to come around. “There’s always demand for our product,” says Paul. “Sometimes we joke that we’re like a utility, like a water company. We just have to make sure that we monetize it in a way that we can reinvest and keep producing.”